Key Takeaways
Align Technology Inc. reported record second-quarter revenue of $1.06 billion, up 4.3% from a year earlier, driven by all-time high clear aligner shipments of 691,800 cases that offset a double-digit decline in its scanner business.
"The results were in line with our outlook, while clear aligner ASPs and non-GAAP operating margin of 22.9% exceeded our expectations," Chief Executive Officer Joe Hogan said in the July 29 earnings release.
Clear aligner revenue rose 8.2% to $870.9 million, with international markets leading volume growth. Asia-Pacific, Europe, the Middle East, Africa and Latin America all posted double-digit expansion, while North American performance remained stable but uneven by region, Hogan said on the earnings call. The average selling price per case edged up 0.8% to $1,260.
Net income fell 13.1% to $108.3 million, or $1.51 per diluted share, missing the consensus estimate of $1.95 by 23%. The miss reflected a $37.5 million UK value-added tax liability following a tribunal ruling that clear aligners do not qualify as VAT-exempt dental prostheses, as well as restructuring costs tied to a strategic review. On a non-GAAP basis, earnings per share rose 6% to $2.64.
Systems and services revenue, which includes iTero scanners and exocad software, declined 10.8% to $185.3 million as the company shifted toward lower-cost scanner configurations, leases and rentals. The strategy reduced upfront revenue but expanded the active scanner install base by about 11%, with scan volumes rising 16% to 12.4 million.
Gross margin improved 1.8 percentage points to 71.7%, supported by operational efficiencies, a tariff refund and higher clear aligner pricing. Non-GAAP operating margin expanded 1.6 points to 22.9%, while GAAP operating margin contracted roughly 1.5 points to 14.6%.
The company generated $192.8 million in operating cash flow and $157.1 million in free cash flow during the quarter. It held $1.10 billion in cash at June 30 and plans to repurchase $400 million to $500 million of stock in 2026.
Align maintained its full-year revenue growth forecast of 3% to 4% and now expects clear aligner volume growth of approximately 6%. For the third quarter, it projected revenue of $1 billion to $1.02 billion with mid-single-digit clear aligner volume growth. Systems and services revenue is expected to decline 6% to 8% for the full year.
Following discussions with activist investor Elliott Management, Align announced plans to add three independent directors and conduct a comprehensive strategic and operating-model review with a global consulting firm. The company also said it intends to appeal the UK VAT ruling.
The results underscore the resilience of Align's core clear aligner franchise even as the scanner transition weighs on reported revenue. Investors will watch the Q3 earnings call for updates on the strategic review and progress toward management's target of at least 100 basis points of year-over-year non-GAAP operating margin improvement in 2027.
This article is for informational purposes only and does not constitute investment advice.
